Instead of four items this week, I present one longer story that raises an important issue. Please send me your feedback and reactions.
Is “Biblically Responsible” Responsible Investing?
Over centuries, capitalism has settled on commonly-agreed-upon ways to measure, report, and predict the financial performance of companies. But the ability to measure, report, and predict the non-financial performance - the "impact" of companies - is still in its infancy.
One of the challenges with the "ESG / Responsible / Socially Responsible / Sustainable / Social / Ethical / Values Aligned / Impact Investing" space (besides the enormous confusion on just what to call it) is the fact that ultimately "impact" is in the eye of the beholder.
In the capital markets, there are three key actors:
- Asset owners: people (like you and me) who give their money to professionals to manage on their behalf
- Asset stewards: people overseeing money on behalf of an organization (like a pension fund or an insurance company or a university endowment)
- Asset mana gers: professionals who invest money on behalf of asset owners and asset stewards
Many asset managers are reluctant to invest based on their own personal values, lest they jeopardize their fiduciary duty to prudently maximize financial returns for asset owners & stewards. Fair enough. But subjective personal values necessarily inform how one defines non-financial impact.
So whose values?
This brings us to Inspire Investing, a California-based asset manager that seems, with a website featuring clean design and inspiring stock photos, like any other "responsible investing" firm. The landing page welcomes visitors with the headline: "Good values and good returns are not mutually exclusive. Join the low cost, high impact investing revolution."
As the Financial Times reports, this week the firm launched two new investment funds "aimed at conservative evangelical Christians that explicitly exclude companies that participate in or support the lesbian, gay, bisexual or transgender “lifestyle”:
"[These two funds] appear to be the first to explicitly screen out stocks of companies that support LGBT rights, alongside businesses involved in abortion, gambling, alcohol, pornography and terrorism...
Mark Snyder, a spokesman for the Equality Federation, a LGBT rights organisation, was sceptical that interest would be so strong.
“This is out of step with mainstream America, which has embraced non-discriminatory policies and fairness,” Mr Snyder said. “When organisations and fringe activists have attempted to boycott organisations that support LGBT rights it has tended to be ineffective, so I think it probably won’t garner much interest.”
...The corporate world has increasingly embraced the LGBT cause, with companies such as Apple and Goldman Sachs among the biggest supporters of more inclusionary policies, LGBT rights organisations and events like the annual Gay Pride Parade in New York.
As a result they and many others may be excluded from the [new Inspire investment funds]. “Business has been leading the way,” Mr Snyder said. “I feel very confident that the business community is on the side of equality and fairness.”
Inspire is a small investment company based in California focused on “Biblically Responsible Investing” [BRI], a subset of socially responsible investing, which Mr Netzly said “mostly caters to liberal values”.
The company uses a scoring system it calls the Inspire Impact Score to grade companies and select them for inclusion in its underlying BRI index and the ETFs [investment funds] a methodology that removes any companies with “any degree of participation” in activities that “do not align with biblical values”...
Inspire donates half its profits to charities, including those supporting Syrian refugees and clean water initiatives in Africa, but its screens exclude companies like Apple, Starbucks and others that “take a hardline, activist line” on gay rights, according to Mr Netzly.
“BRI is an investing approach that seeks to ensure that a Christian is investing in a way that is consistent with the moral standards of the Bible . . . BRI products, through their excluding, engaging and endorsing activities, help Christian investors maintain their integrity and responsibility to biblical stewardship while actively investing in the stock market,” the company’s website says."
According to the New York Times:
"Shares of Berkshire Hathaway, whose chief executive, Warren E. Buffett, has been a major donor to Planned Parenthood, would not make the cut, [he said. Nor would Apple, Mr. Netzly said, claiming that pornography can be purchased through iTunes. (An Apple spokesman said pornography is not permitted.)
Companies like Amazon that have publicly supported gay marriage also would not pass muster. “Any company that takes a hard-line approach” to the issue would not pass the test, Mr. Netzly said.
On the other hand, shares of Tesla Motors and Under Armour would."
Actors in the capital markets are diverse, and they do not all share the same values, except, arguably, maximizing financial return. There isn't widespread agreement around what constitutes positive impact. Your values may differ from mine. So an asset manager could provide an investment product for asset owners & stewards that aligns with anti-gay values and a different asset manager could provide a product aligned with pro-gay values, and both can claim that they are "values aligned" responsible investing.
Ultimately, responsible investing represents a seismic shift from investing based on universal values (financial performance) to investing based on non-universal values. Unless we share universal values (are Apple's gay-friendly policies good or bad?), the growth of responsible investing requires asset owners & stewards to articulate their own values and instruct their asset managers to invest according to these values. Responsible investing implies a merger of the marketplace for capital with the marketplace of ideas.
Whose ideas will win out?
Items of Note
- Bill & Melinda Gates release their annual letter for their foundation, addressed to their co-Chair Warren Buffett
- Open Philanthropy Project offers giving recommendations in response to Trump actions
- Prudential's Mark Grier to be new Chair of the Global Impact Investing Network
- ImpactAssets50 updated with new impact investing funds
- GlobalGiving launches new "Learn" platform, with resources for nonprofits, donors, and companies
- Rockefeller Foundation releases a new report: "Situating the Next Generation of Impact Measurement and Evaluation for Impact Investing"
- TONIIC releases a new report and directory, TONIIC 100: Insights from the Frontier of Impact Investing
- Lucy Bernholz's must-read annual industry forecast "Blueprint 2017: Philanthropy & the Social Economy"
- The Stanford Social Innovation Review's Winter Issue has a full debate on how investors can (and cannot) create social value
- McKinsey & Company: How impact investing can reach the mainstrea
- Align Impact seeks an Investment Research Summer Analyst (Santa Monica, CA)
- Noyes Foundation seeks a graduate impact investing intern (NYC)
- Democracy Fund seeks a Director of Evaluation (DC)
- Building Changes is hiring a Director of Measurement, Learning, and Evaluation (Seattle)
- GiveDirectly is hiring for a few positions (NYC)
- Living Cities seeks a Managing Director of their Catalyst Funds (DC)
- Chan Zuckerberg Initiative has several openings (Menlo Park, CA)
March 14-15 Confluence Philanthropy Practitioners Gathering (New Orleans, LA) Impact Investing
March 21-22 Impact Summit Europe (The Hague, Netherlands) Impact Investing
March 23-24 Impact Investing World Forum (London) Impact Investing
March 30 Impact 2 (Paris) Impact Investing
April 4-6 Center for Effective Philanthropy (Boston) Effective Philanthropy
April 7 Wharton Social Impact Conference (Philadelphia) Impact Investing
April 18-20 Conscious Capitalism Conference (Philadelphia) CSR
April 25-26 Impact Capitalism Summit (Chicago) Impact Investing
May 9-10 Shared Value Summit (NYC) CSR
May 10-12 US SIF Annual Conference (Chicago) Impact Investing
May 23-24 CECP Summit (NYC) Effective Philanthropy
May 31 - June 1 Grantmakers for Effective Organizations (Chicago) CSR
Sept 19-21 CHANGE Philanthropy Unity Summit (New Orleans) Effective Philanthropy
Setp 28-29 TBLI Nordic 2017 (Stockholm) Responsible Investing
Oct 10-13 SOCAP17 (SF) Impact Investing
Oct 15-17 Exponoent Philanthropy CONNECT Conference (Denver) Effective Philanthropy
Oct 24-26 BSR Conference (Huntington Beach, CA) CSR
That’s it for this week. Help me spread the word about #AllThingsImpact to your friends and colleagues, who can sign up to receive this newsletter at All Things Impact. Please also send me any job postings, items of note, upcoming events, or compelling links you discover in your own journeys across the web (even things like this dog protecting a little lamb).
Until next time, thanks for reading!
Head of Impact at Liquidnet. Full Bio.